The pressure for hospitals to trim costs is on and only growing more intense. Supply chains are becoming greater targets for savings, especially as the portion of costs involved in the supply chain continues to increase. "It's becoming a mandatory place to focus," says Chris Luoma, vice president of business development at Vendormate.
Supply chain management is also playing a larger role in organizations' strategy than it has in years past, with the focus shifting from prices to overall long-term costs. "Responsibility for supply chain has been elevated to the executive level. Also, as you look at long-term planning, it's less about how to get the lowest prices and more about making sure you're doing business with the right vendor," says Mr. Luoma.
In light of these trends, Mr. Luoma shared five broad steps hospitals can take to ensure they are making the most of their vendor relationships and proactively eliminating needless costs.
1. Look at the supply chain holistically. Previously, hospital leaders have focused on specific, high-cost areas in the supply chain. In today's healthcare environment, with a renewed pressure on cost reduction, hospitals should examine every category for potential savings. "Hospitals buy everything under the sun," says Mr. Luoma. Therefore, hospitals should leave no stone unturned. Mr. Luoma recommends implementing a cost-savings mindset to all supply chain categories, including information technology, facilities and purchased services.
2. Build supply chain resources beyond human capital. As hospitals widen their search for savings in the supply chain, they will need to utilize different tools and networks to do so effectively. "You can't have experts in all different categories on the supply chain staff," says Mr. Luoma. "Look at different tools and networks you can leverage that let you be more efficient and smarter about how you approach contracting decisions and supply chain relationships." For example, a Vendormate tool called Medzo allows providers to look at product and service information for more than 70,000 vendors across the country, which can inform providers' decisions about which vendors are the best in their area.
3. Find vendors that fit your service needs by leveraging your peers. "One of the challenges in supply chain is the historic focus on price, but there is growing spend in healthcare in the services arena," says Mr. Luoma. This calls for a new list of qualifications and credentials for vendors, as the services category includes everything from IT to revenue cycle to facilities and maintenance. A hospital's peers — which can be organized based on geographic location or hospital type or service line — often have valuable feedback about their relationships with vendors, which can better guide the selection process.
4. Make the supply chain a two-sided issue. It's best if providers remember the value of partnership in their relationship with vendors. Providers should ensure they are doing what they can to help their vendors become and remain more efficient, such as ensuring the proper management and accuracy of data. "By doing things that make it easy for the vendors to do business with you, [vendors] become more efficient, can eliminate costs to their business and pass those savings along," says Mr. Luoma.
5. Factor vendors into consolidation plans. Provider consolidation will signal new supply chain relationships and challenges. Mr. Luoma said addressing these changes head-on is a must. "With physician employment increasing, from a vendor's point of view, their sales and service model is changing," he said. For example, vendors' traditional sales methods, such as cold calls, are no longer effective, says Mr. Luoma. Therefore, providers should first look to vendors who can best align with the new organizational structure, but providers should also consider how consolidation could lower the cost-to-serve levels for their vendors.
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Supply chain management is also playing a larger role in organizations' strategy than it has in years past, with the focus shifting from prices to overall long-term costs. "Responsibility for supply chain has been elevated to the executive level. Also, as you look at long-term planning, it's less about how to get the lowest prices and more about making sure you're doing business with the right vendor," says Mr. Luoma.
In light of these trends, Mr. Luoma shared five broad steps hospitals can take to ensure they are making the most of their vendor relationships and proactively eliminating needless costs.
1. Look at the supply chain holistically. Previously, hospital leaders have focused on specific, high-cost areas in the supply chain. In today's healthcare environment, with a renewed pressure on cost reduction, hospitals should examine every category for potential savings. "Hospitals buy everything under the sun," says Mr. Luoma. Therefore, hospitals should leave no stone unturned. Mr. Luoma recommends implementing a cost-savings mindset to all supply chain categories, including information technology, facilities and purchased services.
2. Build supply chain resources beyond human capital. As hospitals widen their search for savings in the supply chain, they will need to utilize different tools and networks to do so effectively. "You can't have experts in all different categories on the supply chain staff," says Mr. Luoma. "Look at different tools and networks you can leverage that let you be more efficient and smarter about how you approach contracting decisions and supply chain relationships." For example, a Vendormate tool called Medzo allows providers to look at product and service information for more than 70,000 vendors across the country, which can inform providers' decisions about which vendors are the best in their area.
3. Find vendors that fit your service needs by leveraging your peers. "One of the challenges in supply chain is the historic focus on price, but there is growing spend in healthcare in the services arena," says Mr. Luoma. This calls for a new list of qualifications and credentials for vendors, as the services category includes everything from IT to revenue cycle to facilities and maintenance. A hospital's peers — which can be organized based on geographic location or hospital type or service line — often have valuable feedback about their relationships with vendors, which can better guide the selection process.
4. Make the supply chain a two-sided issue. It's best if providers remember the value of partnership in their relationship with vendors. Providers should ensure they are doing what they can to help their vendors become and remain more efficient, such as ensuring the proper management and accuracy of data. "By doing things that make it easy for the vendors to do business with you, [vendors] become more efficient, can eliminate costs to their business and pass those savings along," says Mr. Luoma.
5. Factor vendors into consolidation plans. Provider consolidation will signal new supply chain relationships and challenges. Mr. Luoma said addressing these changes head-on is a must. "With physician employment increasing, from a vendor's point of view, their sales and service model is changing," he said. For example, vendors' traditional sales methods, such as cold calls, are no longer effective, says Mr. Luoma. Therefore, providers should first look to vendors who can best align with the new organizational structure, but providers should also consider how consolidation could lower the cost-to-serve levels for their vendors.
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